The Impact of Tax Credits and Incentives on Business Plans.

AuthorKelley, Matt

The Expert: Matt Kelley

If you're steeped in high-impact tax issues, you know how important tax credits and incentives can be when developing and implementing a business plan. They're not only important--they also can be complex, especially in today's economic climate. That's why we thought a one-on-one interview with an expert would be valuable for this column. Senior editor Michael Levin-Epstein sat down with a recognized professional in this space, Matt Kelley, vice president of tax consulting services in Experian's Employee Services group, to get his perspective.

Michael Levin-Epstein: Why are tax credits and incentives relevant to business plans?

Matt Kelley: This is an important question always, but especially right now, as we look at a difficult economic environment, where businesses are going to be very focused on margins, costs, and protecting their base. Tax credits and incentives, historically, have been meant, and are meant, to help businesses achieve those goals. Tax credits and incentives aren't crazy loopholes that no one else knows about that we discover and exploit. They are intentional acts of Congress, and they are meant to help businesses. So, as businesses look at how they can reduce costs, how they can supplement cost to achieve strategic growth, to build head count, to hire, to train, [and] to expand their footprint, tax credits and incentives at the federal, state, and local levels can provide economic support to do that. Whether this is through an income tax credit; whether through a payroll tax credit, like the very popular employee retention credit; or whether through grants to supplement training costs or grants to supplement capital investment; or [through] sales tax exemptions or property tax abatements--all of these tax incentives are provided to encourage business growth and development. This fits squarely within the goals of executives at businesses to help grow their business. In most people's minds, tax credits and incentives are only a piece, but a very pivotal piece, of that business expansion and business plan.

Levin-Epstein: I want to go back a little bit to get some additional historical context. When the IRS first came on the scene, were tax credits and incentives part of the overall tax structure?

Kelley: Tax credits and incentives, in a way, have really been around for hundreds, if not thousands, of years, obviously outside of the US as well. Initially, when taxes were imposed, there were exemptions to certain classes of businesses or classes of society, so there's always been a way to use taxes to influence the economy. That's always been a lever that governments--including the United States government-have historically wanted to have at their disposal for economic development. I would say recently, in more modern history, in the last twenty to thirty years, tax credits have become more front and center publicly. Tax incentives have become more available, because politicians--state, local, federal politicians--understand they have a role that resonates sometimes with their constituents. If you look at, for example, the Amazon HQ story, tax incentives were on the front page of almost every major newspaper for quite a while as people understood that Amazon HQ was shopping for the most economically viable location. I...

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